Carlsbad biotech goes on a tear

CARLSBAD -- Isis Pharmaceuticals Inc. has been on a tear this
year. The biotechnology company has announced impressive results
with an experimental cholesterol-lowering drug, significantly cut
its operating loss, and signed major deals.

Investors have responded to this brightening outlook. Shares of
Carlsbad-based Isis have roughly doubled over the last 12 months,
from slightly more than $8 a share in mid-October 2006 to nearly
$17 per share on Friday. Most of this gain has come since the
beginning of July, when the stock traded for about $10 apiece.

Like many other biotech companies, Isis has experienced such
excitement before, only to lose steam. Whether that will happen
again depends on whether Isis' cholesterol-lowering drug lives up
to its impressive record in clinical testing. Success would lift
Isis out of its longtime status in the red into the top tier of
profitable biotech companies.

Isis' cholesterol-lowering drug is "an order of magnitude" more
important than any of the other 17 drugs it has under development,
said Stanley T. Crooke, the company's chief executive, in a
Thursday interview.

Cardiovascular disease is the leading cause of death in the
United States. High levels of cholesterol and other blood fats or
"lipids" is seen as a major contributing factor. Drugs that lower
cholesterol, such as Pfizer's Lipitor, are the drug industry's
biggest sellers. Lipitor sales reached $13 billion in 2006.

Formerly called ISIS 301012, the drug was recently given the
generic name mipomersen sodium. It's being tested on patients with
a genetic disease that causes extremely high cholesterol.

So far, the Isis drug has performed as well or better than
anti-cholesterol drugs currently on the market. It reduces the
level of so-called "bad" cholesterol and other disease-associated
fats in the blood. And when given in addition to these
already-approved drugs, the level of these fats drop even more.

"They've put together some very nice data," said John McCamant,
publisher of the Medical Technology Stock Letter in Berkeley,
referring to multiple studies on safety and effectiveness of the
drug. "These are things that investors are looking for."

Isis is taking measured steps toward its goal. It chose not to
tackle the entire cholesterol market at once, preferring to try for
the much smaller market for the genetic disease, called familial
hypercholesterolemia.

Going after cholesterol

However, if mipomersen gets government approval for that
disease, McCamant said Isis will be in an advantageous position to
get it approved for general use in lowering cholesterol. That will
give Isis access to the huge market now dominated by Lipitor and
similar drugs.

Isis chose familial hypercholesterolemia as its first target
because it is so severe and no effective treatment is on the
market, McCamant said. The FDA is eager to help drugs reach the
market to such diseases, he said.

Isis developed mipomersen on its own and holds all the rights to
it. Crooke said the company intends to strike a deal with a large
pharmaceutical partner before the end of next year. That will allow
the drug to go into the end-stage clinical trials, called Phase
III.

If those trials prove mipomersen safe and effective, the U.S.
Food and Drug Administration will approve the drug for sale.

Crooke described his job as not only a business and medical
undertaking, but also a scientific challenge. Science is the
underpinning for everything Isis does, said Crooke, who holds a
medical degree and a doctorate in pharmacology from Baylor College
of Medicine. Crooke worked at pharmaceutical companies such as
Bristol-Myers Squibb before founding the company.

2,500 patents and counting

Success with mipomersen would not only potentially bring
billions of dollars to Isis, it would prove that its gene-blocking
technology, called "antisense," can produce a blockbuster drug.
That would give Isis -- and investors -- confidence that more
blockbuster drugs would follow.

Crooke founded the company in 1989 explicitly to develop
antisense technology. Isis now employs 275 people.

Isis is widely regarded as the leading company in antisense
technology. The company says it has more than 2,500 antisense
patents, and has made millions by licensing antisense technology to
other companies.

One of those patents, for mipomersen, has the name of Crooke's
wife, Rosanne. She is the program leader in Isis' cardiovascular
group and discovered the drug.

Antisense is intended to stop diseases at the source, by
blocking production of disease-causing proteins. While antisense
works in the laboratory, getting it to work in people has proven
more difficult.

Isis has brought one antisense drug to market, called Vitravene.
Intended for an AIDS-related viral eye infection, the drug is
injected into the eye. Approved for sale in 1997, Vitravene was a
proof of concept for Isis; the drug's sales are insignificant.

The company has other projects. Its Ibis division has developed
a biosensor to quickly detect and identify dangerous bacteria.
However, antisense remains the core of the company.

Paying the bills

Biotech companies are infamous for spending hundreds of millions
of dollars on research and development before they see a profit, if
they ever become profitable. Isis reported losing $68.1 million in
2006, compared with $57.2 million in 2005.

While Isis had reported promising results with earlier drugs,
repeated development problems set the company back. So Crooke has
had to work on two fronts: advancing the science, and making sure
enough money is there to fund the science.

Isis decided about five years ago to de-emphasize its earlier
work on cancer drugs to focus on cardiovascular and metabolic
diseases, Crooke said. The company brought in big pharmaceutical
partners to help with the cancer drugs, and pushed mipomersen to
the forefront.

Isis has kept the money coming in over its 18 years with a
mixture of stock offerings and, more recently, a series of
partnerships, intellectual property deals and milestone payments
for meeting drug development goals with partners. The company has
also picked up money by doing work for the federal government in
such areas as biosafety.

On May 9, Isis and Bristol-Myers Squibb announced a deal under
which Isis will get up to $168 million, in addition to $15 million
up front and $9 million in research funding. Isis will help the
pharmaceutical company develop antisense drugs to prevent and treat
cardiovascular disease. Bristol-Myers Squibb will sell the drugs
and pay Isis royalties on any drugs developed through the
collaboration.

Isis announced in July that it would get $26.5 million from
Alnylam Pharmaceuticals Inc. of Cambridge, Mass., under an
agreement that allowed Alnylam to use Isis patents in a field of
antisense called RNA interference, or RNAi. In return, Alnylam
agreed to give Isis a cut of money earned from work using the
patents.

Deals reduce losses

Such deals have allowed Isis to greatly reduce its projected
2007 loss from an original estimate of the mid-to-high $60 million
range to an Oct. 8 estimate in the mid-to-high $20 million
range.

Crooke said Isis has enough money to keep operating at least
until the end of 2010. As of June 30, Isis had cash, cash
equivalents and short-term investments of $202.7 million.

McCamant, of the Medical Technology Stock Letter, said Isis has
enough resources to negotiate from a position of strength.

Biotech analysts have a rule of thumb that biotech companies
should have at least two years' worth of cash on hand.

"The company has executed this year better than they have
historically," McCamant said. "Their partnerships are very strong,
the government money has been coming. Isis didn't always have that
reputation."

Besides cardiovascular disease, Isis is developing drugs for
metabolic disorders such as Type II diabetes. In recent years, this
form of diabetes, caused by resistance to insulin, has assumed
epidemic proportions. Once called "adult-onset" diabetes, Type II
diabetes has been showing up in adolescents, raising alarm.

So if mipomersen passes its clinical trials and gets to market,
Isis still has an even bigger plate to fill, Crooke said.

"There will be drugs that go well and drugs that fail, and we
certainly had disappointments," Crooke said. "But in the
background, always the science, always the technology, was
advancing."